Financial Advisor Career Track Options When You’re Bad At Sales And Prospecting

Executive Summary

Historically, financial advisors were primarily salespeople. Their role was to sell the insurance or investment products of their companies, and later, only after they proved themselves to be good at sales, did they have the opportunity to earn their CFP certification and do financial planning. But with the rise of the AUM model, the financial advisor career track is changing.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at how the financial advisor career track is evolving today, where increasingly financial planners can get hired without sales skills… but have to worry about whether they’ll hit a wall in their career progression in the future if they can’t learn to prospect for new business.

The good news of the ongoing growth of recurring revenue business models like the AUM model – which should only grow further after the new Department of Labor fiduciary rule drives even more advisory firms towards Level-Fee Fiduciary compensation – is that the opportunities for non-business-development employee advisors are better than ever, with even more opportunity down the road. Simply put, we’re seeing the ongoing separation of being the person who gets the clients, versus the one who services them with great financial planning. Just as sales and service are separated in most other industries as well.

Of course, the caveat is that because it’s harder to get a new client than to serve and retain an existing one, those who can do business development and get new clients will likely earn better compensation, and have more opportunities to become a partner with their advisory firm (as it’s easier to offer a slice of the pie to a potential partner who’s helping to make the pie bigger for everyone). Which means there’s still a good incentive opportunity to learn to do sales and prospecting. But at worst, it’s not a skill that needs to be developed later in the financial advisor career track, and shouldn’t prevent you from earning a reasonable living in the meantime!

#OfficeHours with @MichaelKitces Video Transcript

Well, welcome everyone! Welcome to Office Hours with Michael Kitces!

We’re talking today about sales and business development, and what your career trajectory looks like as a financial advisor if you’re not actually that good at sales and business development to get clients.

I’m covering in this response to a great question that came in from someone this past week. This was a question from Kenneth. [I’m reading the question here] So Kenneth asks:

“What happens to those with CFP designations, who fail to attract clients?”

I think it’s a great question. Kenneth goes on to points out that those with a CPA have a lot of doors open if they don’t like doing auditing, but a financial planner who can’t get clients seems to have more limited options.

Kenneth goes on to say:

“The reason I’m asking is I’m graduating from college and about to be hired into a position. It has a generous base salary to help the firm manage clients. In addition, they’re reimbursing me for costs to get a license, and attain my CFP marks. And in exchange for my salary, I do work managing their clients, and I also get 50% of all the fees I generate from future clients [I bring in].”

So the question that Kenneth asks is:

“I’m worried that if I can’t succeed in bringing in clients over the long-term, am I shooting myself in the foot here, either with this job or other opportunities?”

I wanted to talk about this, because, frankly, my gut response is that this sounds like a really good job position, Kenneth. This sounds like a good job opportunity, and I think really represents the future of the whole profession and where it’s going, where you have an opportunity to earn a healthy salary for giving good financial planning service to clients, and some upside potential over time, if and when you can actually start to bring some of your own clients as well. And I think it’s worth recognizing just how unique, how different this kind of job opportunity actually is from what I’ll call the original financial advisor career track.

The Original Financial Advisor Career Was Simply A Sales Job

The original financial advisor career track was actually pretty simple. It was a sales job. You came in, you sold products. Depending on what channel you came in, you either sold insurance and annuity products, or you sold investment mutual funds-style products. The companies hired, they taught you to sell. When you hear anybody talk about “the good old days” when companies trained you, they didn’t train you on how to be a financial planner. They trained you in how to sell and prospect. They gave you structured mechanisms to do sales and prospecting, and you either sold, or you didn’t sell.

If you were good at sales and prospecting, you were a survivor. And then later, maybe you got training in how to become a financial planner and get your CFP. Even then, usually, you would go get your CFP because it just taught you more about how to ask probing questions and do needs-based selling so that you could sell more products. Because it was still a sales job. The origin of financial planning was all about selling products.

And frankly, that’s still how a lot of organizations do it today. You come in, you go sell products. They put you through their sales training and prospecting, and then if you do a good job at that, maybe at some point in the future, then you will have the opportunity to go and get your CFP marks and actually become a financial planner.

But that’s not the job offer that you’re describing, Kenneth. You’re describing one where you actually get to be serving clients first, doing financial planning first. They’re supporting you getting your CFP certification out of the gate, and later, maybe you’ll be able to do some business development. That a massive change in the financial advisor career track.

How The AUM Business Model Changed The Financial Advisor Career Track

The changing financial advisor career track is a recent phenomenon, and the source of it is the rise of the AUM model, or more generally the rise of recurring revenue business models. Because now, as a firm that has recurring revenue, where if I serve the clients well, they stick around, they continue to pay our fees, and then we continue to give them more service, and they continue to pay our fees. That’s a good, healthy business model.

Now, there are some distinctions to this. You ultimately are serving the clients of the firm. They’re not your clients, not your clients in any legal sense. You’re not building equity in a firm you own. But that’s the nature of the position. If you’re going to be an employee that serves clients, and not the one who goes and brings in and gets the clients, the nature of your ownership of those clients is going to be different, both legally and from a compensation perspective.

But that’s not necessarily a bad thing. I don’t think that’s a death knell to your career track or anything. In fact, I think it’s actually a huge opportunity, that you can simply earn a good living providing great financial planning service to clients. And if and when you learn to do sales and business development down the road, you have more upside. Your upside is building your comp from day one. You’ll participate in the upside growth of the clients you bring in.

And, believe it or not, there are still a lot of firms out there where, if you get hired in as an employee advisor to serve the clients in the firm, they give you little or no bonus if you bring in a couple of your own clients, because you’re really expected to mostly just serve the firm’s clients or bringing business in as just part of your salary. The fact that this firm give you a portion of revenue tied to it, I think is a positive thing, that they’re both fairly compensating you for the job and giving you upside potential. And if you do a really good job at that, what you may find eventually is you may be invited to become a partner of that firm in 5 years or 7 years, or 10 years, or however far it is down the road, because virtually all firms are well incentivized to add partners who do a good job at business development. It’s easy to share the pie when the pie is getting bigger, because you’re helping to grow it.

And then I can’t help but look at this in the context of my own career. I started 16 years ago. When I came in, financial advising was still a product sales job, first and foremost. So I was recruited into a sales firm. I was recruited into a life insurance agency. And I sucked at it, I failed miserably. I guess, actually to be fair, I was merely mediocre at true sales. But I was hopeless at prospecting. The do-not-call list wasn’t in place yet. I did cold-calling, I was horrible. I couldn’t even deliver a cold-calling script. It was bad.

It took me less than a year to realize that this wasn’t going to work at all. And I probably only stuck around the business out of sheer stubbornness. But I was lucky enough to find a job like the one you’re getting hired for now (and they were very sparse back then), where I could work in a firm and just do supporting work for existing clients of the firm, and be able to get my CFP certification, and be able to start growing my career. And, ultimately, was able to run quite a bit with that.

Career Tracks Without Business Development

I actually wrote an article for Financial Planning Magazine over 10 years ago, talking about this emerging as the other side of the planning career track. This idea where I had a job that had no business development requirements and wasn’t going to have any business development requirements, and I still provided value to the firm and made a nice living at it. And when we look at the benchmarking studies today, there are employee advisors that are making $125,000 a year, $150,000 a year. If you’re at a larger firm that’s serving more affluent clients, some of those folks are making as much as $200,000 a year, with very little business development requirements. That’s a pretty damn good living by any standard here in the U.S.!

I should point out, this is still actually not as much as what a lot of firm owners make, and what people who are really good at business development can make, but this is kind of the distinction that happens in almost any industry, including ours. We’ve all heard that old saying, “It’s easier to retain a client than it is to get a new one.” Well, that translates directly into compensation. You will get paid more to get new clients than you do to retain existing ones because of that calculus. It’s harder to get them, so firms have to pay more to sales people to get them. It’s easier to retain them, so you get paid a little bit less as an advisor “just” to retain them.

But given that we’re in the financial services industry and the financial advising world, the compensation opportunities are still more than ample. You can make a very good living simply doing the “serve the clients” part, and evolving into the business development later.

So we all find our own path about what’s comfortable business development, what kind of sales approach is comfortable, but recognize that that may not come for years down your career track. And that’s okay, it doesn’t need to. You can have a great opportunity to earn a great living serving clients. And it sounds like that’s the opportunity you’ve got in front of you. And if and when you learn to do business development over time, the firm is ready to reward you, you’ll have more upside potential, and that can just open even more doors for you down the road as you build out that skill set.

But I wouldn’t stress about it now. I would stress if you couldn’t find a job that would pay you to serve clients and you could only find sales jobs, and that’s actually still a huge challenge. One of the reasons we created our New Planner Recruiting business was to help students that just wanted to find financial planning jobs, go to financial planning firms, because it was hard to find those matches. It’s getting a little easier now, but it’s still a challenge.

So, simply put, I think you’ve got a great opportunity, Kenneth. I think you’re going down the right financial advisor career path. Frankly, I suspect a number of people on this Periscope listening to this who are actually jealous that you have an opportunity to get paid to do financial planning, and a firm that will pay for your licenses and your CFP marks and the rest, and aren’t requiring you to do sales and business development and meet quotas just to earn your salary.

You’ve got a good job opportunity. There’s still room for you to improve yourself over the span of your career, including tackling this business development demon over time. And I know it’s a challenge for a lot of new advisors coming in, but stay on the road you’re going. You’ve got a nice opportunity. I hope that helps a little.

So thanks everyone for joining us today for Office Hours with Michael Kitces, Tuesday 1:00 p.m. East Coast time, right here on Periscope. And have a great day. Take care, everyone!

So what do you think? Are you a financial advisor who has hit a dead end in your career track due to the lack of business development skills? Or have you been able to survive and thrive without honing your sales and marketing abilities? Please share your own experience in the comments below!